Should I Avoid Union Bankshares, Inc. (UNB)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Union Bankshares, Inc. (NASDAQ:UNB)? The smart money sentiment can provide an answer to this question.

Is Union Bankshares, Inc. (NASDAQ:UNB) a healthy stock for your portfolio? The best stock pickers were getting less optimistic. The number of long hedge fund bets were cut by 1 recently. Union Bankshares, Inc. (NASDAQ:UNB) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 4. Our calculations also showed that UNB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are numerous gauges shareholders put to use to appraise publicly traded companies. A pair of the most under-the-radar gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top investment managers can outclass the S&P 500 by a superb margin (see the details here).


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s analyze the fresh hedge fund action encompassing Union Bankshares, Inc. (NASDAQ:UNB).

Hedge fund activity in Union Bankshares, Inc. (NASDAQ:UNB)

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 1 hedge funds with a bullish position in UNB a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Union Bankshares, Inc. (NASDAQ:UNB), which was worth $0.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $0.6 million worth of shares. Invenomic Capital Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Union Bankshares, Inc. (NASDAQ:UNB), around 0.3% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to UNB.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified UNB as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to Union Bankshares, Inc. (NASDAQ:UNB). These stocks are Genesis Healthcare Inc (NYSE:GEN), Potbelly Corp (NASDAQ:PBPB), Oasis Petroleum Inc. (NASDAQ:OAS), Amesite Inc. (NASDAQ:AMST), Malvern Bancorp, Inc. (NASDAQ:MLVF), DLH Holdings Corp. (NASDAQ:DLHC), and Phoenix New Media Ltd (NYSE:FENG). This group of stocks’ market caps match UNB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GEN 6 3979 -2
PBPB 7 20437 -2
OAS 10 5446 -7
AMST 1 293 1
MLVF 7 21196 -3
DLHC 8 35961 3
FENG 8 4029 2
Average 6.7 13049 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $2 million in UNB’s case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand Amesite Inc. (NASDAQ:AMST) is the least popular one with only 1 bullish hedge fund positions. Union Bankshares, Inc. (NASDAQ:UNB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UNB is 37.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on UNB as the stock returned 29.1% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.